NAR: FHA Costs Thwarting Home Sales

The National Association of Realtors has charged the Federal Home Administration with setting the costs of its mortgage insurance so high that it effectively prevented hundreds of thousands of consumers from buying a home.

Credit unions and other lenders have seen sluggish demand for housing finance so far this year.

In an April 3 letter to the Department of Housing and Urban Development, the federal department that oversees the FHA, the NAR acknowledged that the housing crises had left FHA's Mutual Mortgage Insurance Fund depleted. But, the Realtors lobby argued, since it has begun recovering the agency should drop its prices and stop requiring FHA insurance across the life of the loan.

“Achieving homeownership has become more difficult with current FHA mortgage insurance premiums,” the association wrote. “In 2014, FHA fees make up nearly 20% of a monthly mortgage payment. On a $150,000 loan, at 4.5% interest, the mortgage payment is 13% higher today than it was in 2008.”

The association noted that in 2014 the mortgage insurance premium of 1.35% is 80 basis points higher than the rate of 0.55% in 2010.The 80 additional basis points pushed an estimated 1.45 million to 1.65 million renters over a sustainable debt-to-income level for purchase of a home in 2013, the NAR said.

“Of these impacted renters as many as 125,000 to 375,000 would have purchased a home in 2013 had they not been priced out of the market,” the association said.

The association also praised a program called the Homeowners Armed With Knowledge which will offer reduced FHA mortgage premiums for homeowners who complete a housing counseling program, but stressed Realtor concerns that the program will take too long to begin.

“While HAWK is a step in the right direction,” the association wrote. “NAR is concerned about the amount of time it will take to develop the program and make it available to home buyers. We have many qualified homebuyers who need help now, but are being shut out of the market due to record high annual premiums and mortgage insurance for the life of the loan.”